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Waiter, Hold the Foie Gras: Slump Hits New York Dining

For months, restaurants in New York City seemed impervious to the bleak economic news, but recently their phenomenal double-digit growth in sales has come to a screeching halt.

The unluckiest have seen business drop as much as 30 percent, and the city's top restaurants, the places whose stature makes them the least vulnerable to a cooling economy, are starting to feel the chill. Even Jean Georges and its cafe Nougatine are down, according to their owner, Jean-Georges Vongerichten.

Gone are the $10,000 bottles of Bordeaux at Le Bernardin, the $4,000 dinners out of the wood-fired oven at Beacon. Now it's more modest dining, three courses of comfort food for $20 at the Metropolitan Hotel, and half-price wine with the pan-Latin fare at Chicama.

On the brink of the fall season, traditionally the time when lavish new places open and the luxury factor is pumped up on menus all over town, restaurateurs are instead worrying about filling tables in an oversaturated market. There are no splashy openings on the calendar, no new Ducasse on the horizon.

Even established restaurateurs are setting their sights lower. Danny Meyer, an owner of Eleven Madison Park and Union Square Cafe, is opening a barbecue restaurant. Drew Nieporent, an owner of Nobu and Tribeca Grill, is just sitting it out. ''We probably opened two restaurants a year for the last two years,'' he said. ''This year, I'm not opening any new stores.''

It's a sea change in a food-obsessed city. Diners who were willing to endure a three-month wait for a reservation just months ago are now being courted with free meals, discounts and solicitous service.

For almost a year, sales in restaurants across the country have been steadily declining. But New York, the country's premier restaurant city, seemed to buck the trend. No more.

Most restaurateurs are not panicking, and dining rooms appear to be bustling all over town. But a growing number of owners -- particularly of restaurants below the top tier -- are concerned enough to change the way they do business. They are revamping menus, lowering prices, offering special prix fixe meals, even instituting frequent-diner programs. Harder times for restaurants have meant, in many cases, better times for the clientele.

''At the very best restaurants it's easier to get in,'' said Tim Zagat, who owns the Zagat restaurant guide with his wife, Nina. ''They are politer at places like Nobu. Last year they didn't even pick up the phone. Those restaurants are a lot more accessible, but once you get there they are still full.''

Signs of a slowdown are everywhere. William Troy, the owner of Cascade Linen in Brooklyn, keeps a Dow Jones of napkin rentals that includes 18 of the restaurants his company services. His napkin index has seen a drop of 5.6 percent since the beginning of the year, mostly in the last three months. At DeBragga & Spitler, suppliers of top-quality meats, Marc Sarrazin, the owner, says business is down 7 to 8 percent.

Joseph Bastianich, an owner of two respected restaurants, Babbo and Esca, said wine distributors were calling him almost daily, trying to sell him premium wines that they rationed last year. At Dairyland, which sells specialty foods to 3,000 restaurants in New York, the owner, Christopher Pappas, said restaurants that usually pay weekly are taking 30 days to pay; monthly clients are taking 50 or 80 days and longer.

Steve Hanson, who owns midpriced restaurants including Ruby Foo's and Blue Water Grill, said he was getting calls from people who wanted him to buy their restaurants. ''I tell them that I buy only deeply discounted restaurants,'' he said, ''and they may want to call me back in a couple of months.''

The restaurant boom of the last 10 years appears to have produced a restaurant glut. Clark Wolf, a restaurant consultant, said New York was ''overbuilt and overhyped,'' and competition has become fierce.

''Whatever has happened in New York City has been exacerbated by the overabundance of restaurants,'' said Alan Stillman, chairman of the Smith & Wollensky Restaurant Group, which includes Manhattan Ocean Club and Park Avenue Cafe. Business is off 10 percent, Mr. Stillman said: ''We see it as horrible.''

Mr. Nieporent estimates that since 1995, 100,000 new restaurant seats for moderate to fine dining have become available in the city. ''There are going to be a lot of closings,'' he said. ''We hit a saturation point. We are not ready to start discounting, but we are watching very carefully.''

Adam D. Tihany, who designed some of the city's best-known restaurants, including Le Cirque 2000 and Jean Georges, says his New York business has nearly come to a halt. ''A lot of projects started to get canceled about one and a half years ago,'' he said. ''The only projects we have in New York are longer term. Now most of our projects are abroad.''

What is happening in New York reflects a national trend. The NPD Group, a market researcher, reports that the average American will eat out less this year than last, the first decline in 10 years.

Nationally, restaurant sales continue to rise, but at a slim 2.4 percent over the 12 months that ended on July 31, compared with 4.4 percent for the 12 months that ended on Jan. 31, according to Technomic Inc., a food consulting group. Part of that increase in dollar volume can be attributed to price increases.

An August survey of 450 restaurants by the National Restaurant Association reported that at 20 percent of them, customers are taking home more doggie bags than they did two years ago.

Scott W. Keller of DealAnalytics.com, a company that provides online research on mergers and acquisitions, said that restaurant acquisitions are ''extremely hard'' because of the slowdown in growth and a significant decline in profitability.

So far, the restaurants that seem most vulnerable are those in hotels, because of low occupancy rates, and those that are almost as expensive as the top restaurants. ''Expensive second-tier Midtown places, caught in the tightening of corporate budgets, are getting hurt,'' Mr. Zagat said. Small neighborhood places are doing well because they cost about as much as a meal eaten at home.

As businesses tighten their belts, there has also been a drop in the number of bookings for private dining rooms. At Remi, Mr. Tihany said, parties have been trimmed back or canceled. Mr. Sarrazin of DeBragga & Spitler said, ''It's chicken cutlet and salmon instead of steak.''

But at every level, restaurateurs say that it would have been difficult to match, much less better, last year's records, even if the economy had not faltered.

Wine is the first thing diners are spending less on. At Le Bernardin, the tables are still full, but sales of expensive wines have slowed to a trickle. Business is off about 5 percent at Jean Georges and Nougatine because diners are buying cheaper bottles and skipping the final cordial, Mr. Vongerichten said. The fringe hours before 6:30 and after 10 are not filling up the way they did last year, and the early part of the week is quiet. On Sundays, Mondays and Tuesdays, Douglas Rodriguez at Chicama plans to offer a 50 percent discount on wines. Mr. Rodriguez said his business was down 30 percent from last year.

At Patria, Andrew DiCataldo said that upscale Latin restaurant has repositioned itself to be ''more approachable'' and has instituted an all-day $10 bar menu. The Tribeca Grand Hotel is adding a finger food menu that offers smaller portions at lower prices. And there's that $20 dinner at the Metropolitan Hotel.

Other restaurateurs are concentrating on service. ''When you are extremely busy, all you can do is manage the reservation book,'' said Rocco DiSpirito, chef and owner of Union Pacific. ''When it isn't a 24-hour obsession, restaurateurs become sensitized. We've been focusing on the guest experience for six months now.''

After a slow six months, Waldy Malouf at Beacon mailed letters to his regular customers, asking them to come back as guests of the restaurant and to bring a guest. ''The mantra to the wait staff is to make the person want to come back,'' he said, ''to eliminate any sort of snobby New York feeling on the phone and to be much more accommodating at the front door.''

Rick Moonen, the owner and chef at Oceana, has chosen the sweat equity method for reducing costs, working more himself. He has also cut back on shifts so that his employees now have two days off at a time instead of one.

What fall holds depends on whether the prognosticator is an optimist or a pessimist. Most are like Mr. Hanson. ''I think it's going to get really bad,'' he said. ''Consumers are going into a panic, layoffs are just starting. People are in denial. It will start to hit right after September.''

Not everyone is predicting the worst. The few upscale Wall Street restaurants, like Bayard's and Vine, say they are thriving because there is so little competition. David Rockwell, who designed Nobu and Monkey Bar, said none of his New York projects have been canceled. Mr. Vongerichten is going ahead with his plans to open his Spice Market restaurant in Lower Manhattan. ''I haven't put anything on the back burner,'' he said.